Subscriptions Will Help You Thrive in the Ecommerce Era

The past three years have seen a massive surge in both consumer and business ecommerce growth. Insider Intelligence forecasts that U.S. ecommerce consumer sales will cross the $1 trillion line in 2022, and B2B ecommerce will cross the $2 trillion line within two years.

The role of the pandemic in this growth is practically indisputable. However, it is also not unreasonable to see it continuing to grow as more and more buyers have experienced and eagerly adopted the convenience of buying online.

Subscription Ecommerce: Not a Passing Shopping Fad

Yet growth alone is not the most essential piece of the story. People are also changing how they buy online. Financial services firm UBS predicts that this “subscription economy” will grow to $1.5 trillion by 2025, more than doubling its current $650 billion estimate.

People are taking the subscription route for digital and physical items for various reasons: convenience in repeat purchasing, discount pricing in exchange for subscriptions, or fun and experimentation with new products or new features.

Enabling and Driving Subscription Ecommerce

While buyer behavior plays a significant role in the subscription trend, technology innovations are also making it easier for ecommerce businesses to offer subscription-based options. For example, “headless” ecommerce separates the front end (or digital storefront) and the backend (operating components such as payment and inventory management). Headless ecommerce gives merchants more flexibility, agility and ownership of the buying experience than end-to-end commerce platforms.

Packaged commerce solutions have made it relatively simple to start an ecommerce business, but catching the wave of such significant ecommerce growth means being easy to scale. APIs, for example, allow merchants to work with more than one payment gateway, serve customers globally, run both subscription and one-time sale models, and instantly make changes on the front end without long development lags.

Capitalize and Future-Proof

Ecommerce businesses should consider seven factors when adding subscriptions to their offerings.

1. Acquisition: Customers need to know that they have the option to sign up for an ongoing subscription. As a result, you need the flexibility to offer subscriptions at attractive terms and prices in a way that converts them from a one-off purchase.
2. Customer Experience: By definition, subscriptions are an ongoing relationship. If your subscriptions are confusing, hard to pause or cancel, or if they create too much work, your subscriptions will quickly alienate customers, perhaps even driving them to competitors. Nurturing long-lasting relationships with customers is more rewarding for brands than one-off interactions.
3. Growth: Every time you need to add more product categories or expand into new geographies, you need to tack on extra code to stay sales tax compliant and change your operations. As you expand globally, it can be a steep obstacle to rapid growth and flexibility.
4. Payment Gateways: Payment gateways give you the ability to accept more cards and more payment types in more regions. If you lose access to a payment gateway, you cannot collect revenue. Having more than one gives you both greater reach and lower risk.
5. Pricing: A subscription model allows companies to offer consumers different pricing and packaging options, including monthly and annual memberships, curated and set boxes, or Subscribe & Save-style offerings. Those variations are very attractive to shoppers but are a source of frustration for businesses that are not yet ready to deliver them.
6. Inventory: With today’s stretched supply chains, inventory has become a true challenge. While subscriptions cannot get your merchandise off of a ship any faster, ecommerce businesses can use subscriptions to support demand forecasting, inventory control and readiness with greater predictability.
7. Compliance: The more your business grows, the more you expand your compliance footprint with interstate and international requirements such as taxation (requiring remote sellers to collect and pay sales tax based on the customer’s location). Different localities also offer different consumer protections or requirements on labeling or ingredients. Ecommerce sellers should take the necessary steps to ensure they have been and continue to be compliant.

Future-Proof Your Business

These seven factors should not deter anyone. Integrating subscription options into an ecommerce business is worth the effort. It gives businesses opportunities to tap into continued growth by diversifying revenue, enhancing customer relationships and extending customer lifetime value (LTV). 

To get the most out of subscriptions, ecommerce businesses need the ability to adapt quickly and continuously to make proactive changes to their value proposition, pricing and packaging.

Doing so leads to exceptional customer relationships — always the best currency in business. That’s even more true in the subscription economy. And to get the most value from offering an end-to-end consumer experience, automating workflows at scale is now more critical. It helps businesses eliminate workflows and processes with manual touch points.

That’s where automated subscription management and billing can help. To keep their business focus and maintain growth without having to expend unnecessary resources, ecommerce businesses should consider vendors that make automating complex workflows, from subscription and billing to accounts receivable to inventory management, their biggest priorities — and without the strictures of out-of-the-box solutions.

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Kelly Knutson leads U.S. subscription Ecommerce Sales at Chargebee, a global leader in subscription and revenue management.